Dubai skyscrapers have emerged as among the cheapest per square foot in the world for prime office rents in the Skyscraper Index published today by Knight Frank and Newmark Grubb Knight Frank, which ranks the world’s cities as centres for high rise offices and homes.
Skyscraper prime office rents in New York have dramatically increased by 20 per cent to hit $150 per square foot since July 2014, outperforming the leading Asian skyscraper city, Hong Kong. However, Hong Kong still boasts the world’s highest skyscraper office rents at $250 per square foot.
Dubai trails a long way behind at a mere $43 per square foot, just above the last two cities in the table, Kuala Lumpur and Seoul. However, a contrarian investor would have to acknowledge that this represents a huge opportunity if Dubai continues to shift up the league table of global cities.
Even 10 years ago Dubai would not have even made it into this list, though thanks to the building boom of the 2000s the city now has about the same number of skyscrapers as Shanghai, actually one more on a recent survey. However, Shanghai rents at $68.75 per square foot are a third higher than in Dubai.
Of course supply and demand is the clincher. The Dubai real estate boom that went bust in 2009 created a huge oversupply of office space but this has been taken up since then to the extent that there are shortages of certain office floorplates in the city. Going forward if new supply is not forthcoming then the price of the existing space is bound to go up.
Global hub city
For a global hub business city Dubai is indeed offering very inexpensive office accommodation and that will attract firms to locate here. North American and Asian buyers looking for the next boom market for offices should pay attention.
Dubai offices are a very good buy as those who bought a couple of years ago can already attest, particularly for buyers with a long term view, though short-term cyclical fluctuations are also likely as the impact of lower oil prices affects local business.
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